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Asia-Pacific Travel Market Surpasses U.S. to Become Second Largest Regional Travel Market Worldwide

Friday, August 5th, 2011

The Asia-Pacific travel market is diverse and dynamic, and coupled with an equally robust online growth, the travel industry in the region quickly rebounded from the recent global economic slowdown and has catapulted its way to the top as the second largest regional travel market in the world – overtaking the United States in the process.

In a report from PhoCusWright research, the Asia-Pacific travel market grew by 17 percent in 2010, registering the fastest rate over all other regions and reaching sales levels of up to US$255.8 billion.

A significant contributor to this growth is the online leisure and business APAC travel markets which are poised for double-digit growth in the coming months. The online travel market in the Asia-Pacific region reached US$53 billion in 2010 sales and is expected to continue through 2012, where gross bookings are forecasted to reach levels of up to US$70.6 billion. This tremendous growth has been brought about by a significantly increased level of Internet usage among Asia-Pacific economies, most of which are shifting towards an e-commerce focus and purchasing via online means.

With these trends, the Asia-Pacific travel market has evolved into a more mature and stable industry, although there are still some variations with online travel penetration among the various APAC countries. More developed economies such as Japan, South Korea and Australia have more advanced digital infrastructures and are more mature in terms of online travel and e-commerce. However, it’s the emerging online markets like China, India, Vietnam, Indonesia and Malaysia that are driving massive regional growth, with China and India taking the helm.

Current Trends in the Asia-Pacific Travel Market

India and China are the two digital economies spearheading growth in the APAC travel market, with the Chinese marketplace experiencing up to 60 percent average annual increases in online travel bookings, which is expected to break the US$15.4 billion mark in 2011. Aside from its astronomical Internet user population, this growth in the Chinese travel market is spurred also by China’s overall economic growth plus the relaxation of policies that had restricted overseas travel restrictions in the past.

The travel market of India, on the other hand, grew at an average annual growth rate of 46 percent, starting from 2007, and is expected to reach the US$4 billion level by 2011. What has contributed most significantly to this growth are the increased sales of budget airline and railway tickets purchased by India’s growing middle class. The proliferation of online travel agencies, or OTAs, operating in the country have emerged in response to this growing demand in the travel market.

Industry experts are looking at an overall growth of 30 percent to 40 percent per year for the Asia-Pacific online booking market. This is much larger than most mature markets such as the United States, where growth has stabilized at 5 percent per year. Leading international online booking sites like Expedia are expecting bigger numbers to come from the Asia-Pacific region in the next two years, with booking revenues there growing from the current 5 percent to up to 20 percent.

One of the most significant factors driving this growth is the availability of low-cost airlines. Most of these airlines are focused on adapting online channels for marketing, attracting young or first time travelers with cheaper flights and offering them the ability to make their own bookings online with ease. Aside from this, credit card facilities in the region are becoming more secure and available for young travelers, making online bookings faster and more convenient.

Older and more mature Internet users will likewise be attracted to use e-commerce channels for travel with the significant improvements in security as well as usability among these online booking websites. This trend is set to grow much further as Internet penetration continues to increase in the Asia-Pacific economies. Corporate travel for Asia-Pacific executives is another driving factor for growth. Travel bookings and other arrangements can be done more conveniently and effectively online. Once again, emerging markets such as China and India are spearheading growth in the Asia-Pacific corporate travel market, which is expected to reach 35 percent growth in volume by 2011.

Mobile Solutions for Asian Travel

One of the key areas that travel agencies need to focus on and gain leverage with in the Asia-Pacific travel market is mobile technology. There are over 2.1 billion mobile subscribers now in Asia, and out of this figure, 450 million subscribe to mobile Internet. Travel agencies need to find new ways on how to utilize mobile solutions for promotions, branding, and e-commerce in order to give a boost to their overall sales. Mobile internet is a big thing in Asia as compared to other regions in the world. For most Asians, accessing the Internet through their web-enabled handsets using 3G technologies is more affordable and more practical than purchasing personal computers or laptops. Social networking is another factor that is driving Asian mobile Internet through the roof. The Pacific region now registers the highest social network penetration and usage levels in the world. Mobile Internet will continue to grow as telecommunication networks in the area are investing heavily on new 3.5G and 4G technologies that will drive mobile Internet and mobile e- ommerce to the next level. According to Juniper Research, mobile e-commerce will be a US$630 billion market by the year 2014 and the Asian market will be taking a large chunk from these transaction revenues due to its subscriber base – an already enormous number that is forecasted to grow by more than 50 percent per annum until the year 2020.

Travel agencies will be looking to tap into this tremendous potential and drive targeted traffic into their multi-channel commerce travel sites. Providing the mobile solutions that travel agencies will need to achieve this are various services providers for the travel market, with Abacus leading the pack with its wide variety of mobile solutions and applications. Such solutions provide web-based point-of-sales solutions for pricing, reservations, and ticketing anytime and anywhere using the client’s smartphones or tablet PCs. Trip itineraries can be sent directly to clients’ mobile devices even while they are on the go.

Travel agencies should also be seriously regarding the potential of mobile apps made available through more than 38 app stores in the online world, each catering to every native machine environment that users’ smartphones or tablets are designed with. Apps designed for the travel market offer a wide variety of uses and applications designed to cater to every potential need of commercial or corporate travelers. Mobile travel itinerary apps, automatic flight notifications, trip-specific messages, oneclick access to trip details, booking status and other tools needed to organize trips are made available through these apps – accessible 24 hours a day.

Issues and Challenges for the Asian Travel Market

As the Asia Travel market repositions itself in the global tourism market, premium Asian destinations are faced with issues and challenges on how to market to the growing middle class in the region. Premium resorts in Asia were originally designed to cater to the vacation habits of more established travel markets such as Europe or the United States. However, these premium accommodations may not be suitable or attractive to the growing number of South Asian travelers. Asian economies recognizing this potential are revamping their tourism strategies and are putting in middle-market accommodations to compliment their premium properties.

One challenge online travel agencies are faced with is fare coding, particularly in the big travel markets such as China and India. For one thing, it is difficult to get accurate fare information in China, resulting in information vacuums that make e-ticketing very complex. Another issue is the lack of hotel chains in China for commercial travelers, although this has proved to be very beneficial and economical for business travelers who can avail of a $35 luxury room in some of the few hotel chain companies in the country. But this will soon change in the near future as hotel chain companies are ramping up their room figures in a short span of time – a different take in hospitality real estate that can happen only in China.

Another challenge to focus on is the issue of credit cards in China. Just like most vertical industries, credit card processing is a monopoly there, with China UnionPay at the driver seat. This has created a huge challenge for other major credit card players like Visa, MasterCard and Amex, all of which cannot establish clearinghouses in China. Everything must pass through China UnionPay in order for processing to take place, so it is important for these players to establish data integration in order to sync in with China’s system.

Faced with these issues and more, the Pacific Asia Travel Association (PATA) recently conducted their 60th Anniversary and Conference with a focus on topics such as the rapidly changing travel demographics, responsible tourism, aviation issues and adoption of new technologies. Now the world’s second largest travel market in the world for both inbound and outbound tourism, the Asia-Pacific travel market is definitely changing the world tourism project that will continue to steer the global industry in the post global economic crisis era.

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